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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                         
Commission file number: 001-36710
Shell Midstream Partners, L.P.
(Exact name of registrant as specified in its charter)

Delaware46-5223743
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
150 N. Dairy Ashford, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
(832) 337-2034
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units, Representing Limited Partner InterestsSHLXNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ý
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company

Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý


The registrant had 233,289,537 common units outstanding as of November 1, 2019.





SHELL MIDSTREAM PARTNERS, L.P.
TABLE OF CONTENTS
 
Page
                   Unaudited Consolidated Statements of Income
* SHELL and the SHELL Pecten are registered trademarks of Shell Trademark Management, B.V. used under license.



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 2019December 31, 2018
(in millions of dollars)
ASSETS
Current assets 
Cash and cash equivalents$294  $208  
Accounts receivable – third parties, net12  19  
Accounts receivable – related parties30  29  
Allowance oil13  13  
Prepaid expenses2  15  
Total current assets351  284  
Equity method investments926  823  
Property, plant and equipment, net733  742  
Operating lease right-of-use assets 5    
Other investments2  62  
Other assets – related parties2  3  
Total assets$2,019  $1,914  
LIABILITIES
Current liabilities
Accounts payable – third parties$3  $4  
Accounts payable – related parties10  9  
Deferred revenue – third parties  8  
Deferred revenue – related party  3  
Accrued liabilities – third parties22  13  
Accrued liabilities – related parties19  16  
Total current liabilities54  53  
Noncurrent liabilities
Debt payable – related party2,691  2,091  
Operating lease liabilities  4    
Finance lease liabilities  25  25  
Other unearned income  2  2  
Total noncurrent liabilities2,722  2,118  
Total liabilities2,776  2,171  
Commitments and Contingencies (Note 14)
(DEFICIT) EQUITY
Common unitholders – public (123,832,233 units issued and outstanding as of both September 30, 2019 and December 31, 2018)3,461  3,459  
Common unitholder – SPLC (109,457,304 and 99,979,548 units issued and outstanding as of September 30, 2019 and December 31, 2018)(196) (198) 
General partner – SPLC (4,761,012 and 4,567,588 units issued and outstanding as of September 30, 2019 and December 31, 2018)(4,042) (3,543) 
Accumulated other comprehensive loss  (6)   
Total partners’ deficit(783) (282) 
Noncontrolling interests26  25  
Total deficit(757) (257) 
Total liabilities and deficit$2,019  $1,914  

The accompanying notes are an integral part of the consolidated financial statements.
3


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019201820192018
(in millions of dollars, except per unit data)
Revenue
Transportation, terminaling and storage services – third parties$33  $58  $109  $150  
Transportation, terminaling and storage services – related parties68  66  196  164  
Product revenue – third parties  1  4  2  
Product revenue – related parties10  14  26  24  
Lease revenue – related parties14  14  42  42  
Total revenue125  153  377  382  
Costs and expenses
Operations and maintenance – third parties19  21  48  89  
Operations and maintenance – related parties14  13  44  39  
Cost of product sold – third parties  1  3  2  
Cost of product sold – related parties10  13  23  21  
Loss from revision of asset retirement obligation    2    
General and administrative – third parties2  1  8  5  
General and administrative – related parties14  12  37  39  
Depreciation, amortization and accretion12  11  36  34  
Property and other taxes5  3  14  13  
Total costs and expenses76  75  215  242  
Operating income49  78  162  140  
Income from equity method investments115  73  265  161  
Dividend income from other investments  15  14  53  
Other income8  8  28  24  
Investment, dividend and other income123  96  307  238  
Interest expense, net26  19  67  43  
Income before income taxes146  155  402  335  
Income tax expense        
Net income146  155  402  335  
Less: Net income attributable to noncontrolling interests5  6  14  11  
Net income attributable to the Partnership$141  $149  $388  $324  
General partner’s interest in net income attributable to the Partnership$36  $37  $93  $96  
Limited Partners’ interest in net income attributable to the Partnership$105  $112  $295  $228  
Net income per Limited Partner Unit - Basic and Diluted:
Common$0.45  $0.50  $1.30  $1.04  
Distributions per Limited Partner Unit$0.4450  $0.3820  $1.2900  $1.0950  
Weighted average Limited Partner Units outstanding - Basic and Diluted:
Common units – public123.8  123.8  123.8  120.6  
Common units – SPLC109.5  100.0  104.1  98.5  
The accompanying notes are an integral part of the consolidated financial statements.
4


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
(in millions of dollars)
Net income$146  $155  $402  $335  
Other comprehensive loss, net of tax:
Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax        
Comprehensive income$146  $155  $402  $335  
Less comprehensive income attributable to:
Noncontrolling interests5  6  14  11  
Comprehensive income attributable to the Partnership$141  $149  $388  $324  

The accompanying notes are an integral part of the consolidated financial statements.
5


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 

Nine Months Ended September 30,
20192018
(in millions of dollars)
Cash flows from operating activities
Net income$402  $335  
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion36  34  
Loss from revision of asset retirement obligation2    
Allowance oil reduction to net realizable value1    
Non-cash interest expense1    
Undistributed equity earnings(5) (2) 
Changes in operating assets and liabilities
Accounts receivable4  (13) 
Allowance oil(1) (3) 
Prepaid expenses and other assets14  10  
Accounts payable  (5) 
Deferred revenue and other unearned income(11) (4) 
Accrued liabilities15  16  
Net cash provided by operating activities458  368  
Cash flows from investing activities
Capital expenditures(31) (38) 
Acquisitions from Parent(90) (482) 
Contributions to investment(13) (21) 
Return of investment56  41  
Net cash used in investing activities(78) (500) 
Cash flows from financing activities
Net proceeds from equity offerings  973  
Borrowings under credit facilities600  1,820  
Repayments of credit facilities  (1,573) 
Contributions from general partner  20  
Capital distributions to general partner(510) (739) 
Distributions to noncontrolling interests(13) (11) 
Distributions to unitholders and general partner(379) (302) 
Other contributions from Parent9  7  
Credit facility issuance costs  (1) 
Repayment of finance leases(1)   
Net cash (used in) provided by financing activities(294) 194  
Net increase in cash and cash equivalents86  62  
Cash and cash equivalents at beginning of the period208  138  
Cash and cash equivalents at end of the period$294  $200  
Supplemental cash flow information
Non-cash investing and financing transactions:
Change in accrued capital expenditures$(2) $1  
Other non-cash contributions from Parent  2  
The accompanying notes are an integral part of the consolidated financial statements.
6


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN (DEFICIT) EQUITY
Partnership
(in millions of dollars)Common Unitholders PublicCommon Unitholder SPLCGeneral Partner SPLCAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2018$3,459  $(198) $(3,543) $  $25  $(257) 
Impact of change in accounting policy (Note 4)(4) (5) —  —  —  (9) 
Net income58  47  27  —  5  137  
Other contributions from Parent—  —  7  —  —  7  
Distributions to unitholders and general partner(49) (40) (40) —  —  (129) 
Distributions to noncontrolling interests—  —  —  —  (3) (3) 
Balance as of March 31, 2019$3,464  $(196) $(3,549) $  $27  $(254) 
Net income45  40  30  —  4  119  
Other contributions from Parent—  —  9  (6) —  3  
Distributions to unitholders and general partner(51) (42) (26) —  —  (119) 
Distributions to noncontrolling interests—  —  —  —  (6) (6) 
June 2019 Acquisition—  —  (510) —  —  (510) 
Balance as of June 30, 2019$3,458  $(198) $(4,046) $(6) $25  $(767) 
Net income56  49  36  —  5  146  
Other distributions to Parent—  —  (1) —  —  (1) 
Distributions to unitholders and general partner(53) (47) (31) —  —  (131) 
Distributions to noncontrolling interests—  —  —  —  (4) (4) 
Balance as of September 30, 2019$3,461  $(196) $(4,042) $(6) $26  $(757) 


7


Partnership
(in millions of dollars)Common Unitholders PublicCommon Unitholder SPLCGeneral Partner SPLCNoncontrolling InterestsTotal
Balance as of December 31, 2017$2,774  $(507) $(2,856) $23  $(566) 
Impact of change in accounting policy(1) 1  (2) —  (2) 
Net income21  16  27  1  65  
Net proceeds from equity offerings673  300  —  —  973  
Contributions from general partner—  —  20  —  20  
Other contributions from Parent—  —  5  —  5  
Distributions to unitholders and general partner(33) (30) (20) —  (83) 
Distributions to noncontrolling interests—  —  —  (2) (2) 
Balance as of March 31, 2018$3,434  $(220) $(2,826) $22  $410  
Net income43  36  32  4  115  
Other contributions from Parent—  —  2  —  2  
Distributions to unitholders and general partner(43) (35) (28) —  (106) 
Distributions to noncontrolling interests—  —  —  (4) (4) 
May 2018 Acquisition—  —  (738) —  (738) 
Balance as of June 30, 2018$3,434  $(219) $(3,558) $22  $(321) 
Net income62  50  37  6  155  
Other contributions from Parent—  —  2  —  2  
Distributions to unitholders and general partner(45) (36) (32) —  (113) 
Distributions to noncontrolling interests—  —  —  (5) (5) 
Balance as of September 30, 2018$3,451  $(205) $(3,551) $23  $(282) 

The accompanying notes are an integral part of the consolidated financial statements.

8


SHELL MIDSTREAM PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
Except as noted within the context of each note disclosure, the dollar amounts presented in the tabular data within these note disclosures are stated in millions of dollars.

1. Description of Business and Basis of Presentation

Shell Midstream Partners, L.P. (“we,” “us,” “our” or “the Partnership”) is a Delaware limited partnership formed by Royal Dutch Shell plc on March 19, 2014 to own and operate pipeline and other midstream assets, including certain assets acquired from Shell Pipeline Company LP (“SPLC”) and its affiliates. We conduct our operations either through our wholly owned subsidiary Shell Midstream Operating LLC (“Operating Company”) or through direct ownership. Our general partner is Shell Midstream Partners GP LLC (“general partner” or “sponsor”). References to “RDS”, “Shell” or “Parent” refer collectively to Royal Dutch Shell plc and its controlled affiliates, other than us, our subsidiaries and our general partner.

Description of Business

We are a growth-oriented master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. As of September 30, 2019, our assets include interests in entities that own crude oil and refined products pipelines and terminals that serve as key infrastructure to (i) transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and (ii) deliver refined products from those markets to major demand centers. Our assets also include interests in entities that own natural gas and refinery gas pipelines that transport offshore natural gas to market hubs and deliver refinery gas from refineries and plants to chemical sites along the Gulf Coast.

We generate revenue from the transportation, terminaling and storage of crude oil and refined products through our pipelines and storage tanks, and generate income from our equity and other investments. Our operations consist of one reportable segment. 

The following table reflects our ownership interests as of September 30, 2019:
SHLX Ownership